"Budget cannot be a panacea for all the problems," believes Prabodh Agarwal, Head - Institutional Research, IIFL on the expectations from the Union Budget to be announced on February 28.

Agarwal opines that people are aware of the macroeconomic situation in the country and hence have toned down their expectations. However, despite the positive economic moves made by the Government, Agrawal says the Budget needs to be followed by more such reforms in the coming days.

Below is the edited transcript of Agarwal’s interview to CNBC-TV18.

Q: What are your expectations from this year's Budget. There has been a lot of talk about the fact that this is going to be a Budget for the equity markets. It is going to be a capital market friendly Budget. What are your own expectations?

A: Investors are very cognizant of the macroeconomic risks. All the macroeconomic indicators have been worsening over the last few months. People are very cognizant of that and therefore the expectations have been toned down significantly. Obviously, there are lots of expectations from the Budget, but people also realise that the Budget has its own limitations.

Budget cannot be a panacea for all the problems and the Finance Minister (FM) has to walk a very tight rope between inducing growth as also maintaining fiscal responsibility.

People also realise that a lot of reason for the slowdown in the investment cycle is not because of fiscal reasons. It is infact because of the fact that there has been a policy paralysis and various government ministries are involved like the ministry of environment, industry ministry and the mining industry. All these issues cannot be tackled through the Budget.

So, I guess, the tone has been very positive over the last few months where several reform measures have been taken. The Budget has to be followed by more reform measures in the coming months.

Q: From capital market's point of view there has been talk about the Securities Transaction Tax (STT) rationalisation, the FM is trying to push the Rajiv Gandhi Equity Scheme. What do you really expect from a capital market's point of view?

A: From a capital market's point of view, first we are expecting that the tax rate should not change.

We don't expect any tax cuts, but corporate tax rate, individual tax rate, the dividend distribution tax rate; the short-term capital gains tax rate should remain unchanged. In the Budget there could be some incentive to redirect savings towards financial instruments.

So, the limit under 80C may be raised or there could be some incentive directly for the equity linked savings scheme or Rajiv Gandhi Savings Scheme could be made more attractive. These are some expectations from the upcoming Budget.